Macy’s, the largest department store operator in the U.S., has scaled back its annual profit forecast as it wrestles with rising tariffs and a more cautious consumer environment, especially in the clothing and accessory segments. On Wednesday, the retail giant highlighted the challenges posed by trade duties introduced under President Donald Trump’s administration, which continue to pressure both supply chain costs and shopper demand.

“As elevated pricing gradually filters through the retail system, we’ve opted for a more conservative full-year outlook,” said CEO Tony Spring during the company’s earnings call. Spring noted that Macy’s is strategically raising prices in certain categories to cushion its profit margins from the burden of tariffs.

Despite the reduced profit guidance, investors found some silver linings. Shares rose about 3% in premarket trading after Macy’s exceeded Wall Street expectations for its first-quarter earnings. The company also reaffirmed its annual revenue projection, anticipating net sales in the range of $21 billion to $21.4 billion—showing that Spring’s turnaround plan may be gaining momentum.

Spring has prioritized reinvigorating Macy’s portfolio by spotlighting higher-performing divisions such as Bluemercury, known for beauty and skincare, and luxury-centric Bloomingdale’s. These shifts come as discount retailers continue to challenge the core Macy’s brand. While redesigned Macy’s outlets have shown improvement, the broader chain still struggles with consistency, according to Morningstar analyst David Swartz.

Macy’s has now reported 12 consecutive quarters of declining sales, a stark contrast to the four-year growth streak seen at Bluemercury. The company now expects adjusted earnings per share for fiscal 2025 to fall between $1.60 and $2.00—down from its previous forecast of $2.05 to $2.25. Management cited an expected earnings hit of 10 to 25 cents per share from tariffs, noting that roughly 20% of its private-label merchandise is sourced from China.

Still, some analysts remain cautiously optimistic. “It’s encouraging that Macy’s didn’t withdraw its fiscal 2025 outlook altogether, as many others have,” analysts from Citi noted. For the quarter ending May 3, Macy’s posted net sales of $4.6 billion, slightly ahead of the $4.5 billion forecasted by LSEG, and an adjusted earnings per share of 16 cents—beating estimates by 2 cents.

In a volatile retail environment shaped by geopolitical pressures and shifting consumer preferences, Macy’s is attempting to strike a balance between reinvention and resilience.